China hopes for cheaper, steady oil supply from diverse sources
China and Saudi Arabia are eyeing deeper energy cooperation as Saudi Arabia's Deputy Crown Prince Mohammed bin Salman prepares to visit China. [Special coverage]
Prince Mohammed is scheduled to visit China from Monday to Wednesday and will co-chair a high-level meeting between Saudi and Chinese officials led by Chinese Vice Premier Zhang Gaoli, China's Ministry of Foreign Affairs announced last week.
During his visit, Prince Mohammed will meet Chinese officials on further strengthening economic ties with a number of deals, including the signing of memorandums of understanding on cooperation in the power sector and one on cooperation on oil storage, Saudi Arabia's English-language newspaper Arab News reported on Thursday.
Deals expected to be signed during Prince Mohammed's trip also include investments in Saudi Aramco, the country's largest state-run oil producer, the Arab News said. Aramco is reportedly planning to go public, issuing about 5 percent of its shares as part of the kingdom's economic reform plan.
Though other areas such as security cooperation are expected to be discussed, the main focus of the prince's trip will be on further opening the Chinese market, as the country faces deteriorating global market conditions for its oil exports and as China moves to bolster its strategic inventory, experts noted.
Saudi Arabia, one of the world's largest oil exporters, has been suffering from sluggish global demand, shrinking prices and rising competition from countries like Russia and Iran.
"At a difficult time like this, it is natural for Saudi Arabia to turn to China, the world's second-largest oil importer," said Lin Boqiang, director of the Center for Energy Economics Research at Xiamen University. "I expect a relatively good deal for both sides during the visit."
The potential deal would guarantee Saudi Arabia more access to the huge and expanding Chinese market, while helping China secure a steady oil supply at lower prices, according to Lin.
China is already one of the largest importers of Saudi oil. In the first half of 2016, China imported about 1.07 million barrels of oil per day from Saudi Arabia, or 14 percent of China's foreign oil supply, according to Bloomberg.
Strategic oil storage
The potential for growth in Chinese oil imports is promising, as China needs to fill its strategic stock, according to Wang Jun, deputy director of the China Center for International Economic Exchanges' Department of Information.
"Our strategic crude oil inventory only covers about 30 days, which is low, compared to other countries' 180-day stock. Furthermore, China's oil storage infrastructure has improved significantly and can store much more oil now, so there is a huge potential," Wang told the Global Times.
Crude oil deals with Saudi Arabia would also diversify the supply channels for Chinese oil imports, which is conducive to the country's energy security, Lin noted.
Prince Mohammed, who is scheduled to return to China after a visit to Japan to attend the G20, will present his country's economic reform plan, under which the Saudi government would spend $72 billion on projects aimed at diversifying the kingdom's economy.
